Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive, and the motive is the gap.
======================================================================================================================================================================================
Considering how inept and indeed, criminal, Congress is, to call something the “worst” law really says a lot. But that is my opinion, and I’ll let you be the judge.
If you haven’t already, you soon will hear a great deal of garbage about a truly garbage law: H.R 2847, aka “Hiring Incentives to Restore Employment Act” aka HIRE.
Summarized in Wikipedia, one purpose of the law is:
. . . to provide payroll tax breaks and incentives for businesses to hire unemployed workers.
The law includes the usual complicated, convoluted formula, which is Congress’s method for obscuring the real negative effects of its legislation:
Employers are eligible for a payroll tax credit when the employer hires certain new employees.
The employee must have either been unemployed for at least 60 days prior to hire or worked fewer than 40 hours for another employer during the previous 60 days.
Employers do not pay the employer portion of social security tax, which is 6.2 percent, on wages paid to eligible new hires.
In addition, employers receive a general business income tax break if the employer continues to employ the new hire for at least 52 weeks.
The tax break is the lesser of $1,000 or 6.2 percent of wages paid to the new employee during the 52-week period.
Ineligible are employees who earn more than $106,000 per year and employees who displace a current employee, unless the first employee resigned or was terminated for cause.
If that unintelligible law isn’t twisted enough. Congress claims the need to “pay for it” by adding another more sinister law: Foreign Account Tax Compliance Act of 2010 (FATCA). According to Money News
FATCA deals with U.S. taxpayers that hold foreign accounts overseas.
It requires them to report their foreign accounts and offshore assets to the government and foreign financial institutions (banks, stock brokers, hedge funds, pension funds, insurance companies, trusts, etc.) are also required to report information about the ownership of overseas assets.
These institutions will have to send annual reports to the IRS on the name and address of each U.S. client as well as their largest account balance in the year and their total debits and credits within the accounts.
If an institution does not comply, the United States will impose a 30 percent withholding tax.
There are other features of this monster set of laws, which I won’t describe. First I’m not tax-law competent enough, and second, the details aren’t the point, which is that the law is based on three myths.”
Myth 1. In exchange for a payroll tax credit, an employer will hire someone he doesn’t need. As a businessman, who over the years has employed thousands of people, I can assure you of this: I never hired someone I didn’t believe I needed.
The cost of employees is so great, that a small reduction in taxes would not entice me. In fact, my thought always was to do everything possible not to hire people.
As business grew, I would create efficiencies, add equipment, farm out certain functions, and only as a last resort, would I hire people.
And I certainly would be reluctant to hire someone I had to keep for 52 weeks.
Myth 2. It’s better for the economy, i.e. reduces unemployment, to hire someone who currently is unemployed than to hire someone who is employed. Only in the world of Congress, could this make any sense at all.
As mentioned in Myth #1, businesses only employ the people they feel they need. Whether a company hires an unemployed person or an employed person, makes no difference in total employment.
Yes, hiring an unemployed person can reduce unemployment. But hiring an employed person, causes him to leave his previous job, which creates a need there. So they hire someone, which also reduces unemployment.
The key to reducing unemployment is not a naive, complex law to reward employers for hiring the unemployed, as opposed to hiring the employed. The key to reducing unemployment is to increase the need for hiring.
How? By strengthening the ability of the middle- and lower-income groups to purchase.
If the people are stronger financially, they will buy more goods and services, which will stimulate businesses to take on more employees. The “Ten Steps to Prosperity” (below) would do just that.
Except in rare circumstances, companies don’t hire first, then hope business will improve. Companies wait until business improves, then hire to meet the need. Business precedes hiring. The government seems to think hiring precedes business.
Finally, even reducing unemployment is not a worthwhile goal. The goal should be to increase the standard of living of all Americans and to help us achieve happiness we all pursue. That is accomplished, not by making more of us work more. Quite the contrary.
The goal should be for more of us to work less, but receive more. That is what increased efficiency was supposed to accomplish. Instead, we have more of us working less and receiving far less.
The cure: Increased federal social spending. More people receiving more, would spend more, thus encouraging more production,leading to more hiring, which in turn would encourage even more spending, in a rising helix of prosperity.
It all begins with money flowing to the middle- and lower-income groups. It begins with a narrowing of the GAP between the rich and the rest.
Myth 3. The federal government needs additional taxes to pay for H.R. 2847. By now, you have learned this is called the BIG LIE, and is utter nonsense. The U.S. federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the dollar.
Even if all federal taxes fell to $0, the federal government could continue paying all its bills, forever.
Bottom line: For the false need (the BIG LIE) to “pay for” a complicated and completely useless employment bill, Congress has established a NASA-style, international information-sharing program, the goal of which is to ensnare the entire world in a gigantic, financial database, allowing all governments to know everything about everyone.
H.R. 2847 in nothing more than the stalking horse for FATCA. Even after H.R. 2847 is shown to be useless, and disappears, FATCA will remain, and yet another step will be taken toward overall and absolute government rule over, and intrusion into, our lives.
Knowledge is power, and in America, the powerful continue to increase their intimate knowledge of us.
Rodger Malcolm Mitchell
Monetary Sovereignty
====================================================================================================================================================
Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
—–
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
More people receiving more, would spend more, thus encouraging more production,leading to more hiring……..
It’s like building a campfire. You apply the stimulus to the fine twigs at the bottom of the pile then makes its way to the middle branches and then to the top where the logs are.
I wonder how many big shots were ever boy scouts?
LikeLike
tetrahedron720 says: “More people receiving more, would spend more, thus encouraging more production, leading to more hiring.”
Very true. But why should the 1% care about more hiring? They no longer need employees nor customers, nor sales, nor consumer demand, since they no longer derive their wealth from the production and sale of goods and services. They get their wealth by trading and speculating in the financial world. They want the real economy to remain stuck in a permanent depression, so they can keep the gap between themselves and the 99% permanently wide.
Of course, our world is not totally financialized. Companies still make and sell consumer goods. There is still a real economy. Unfortunately it is now subordinate to the financial economy, whose players are the Masters of the World.
We must re-regulate the financial sector, such that financial capitalism (i.e. the “financial economy”) once again becomes subordinate to industrial capitalism (i.e. the “real economy”).
But this is not possible, since the lords of finance own all the politicians.
The masses don’t want to hear the truth anyway. They think Rodger is insane. (As the saying goes, when everyone is stampeding toward the edge of the cliff, the person moving in the opposite direction is considered insane.)
We could stimulate hiring by having the government create more money, but this would be useless without re-regulation. We must control where the money goes and what it is used for. Without this control, more money in people’s hands would encourage students, for example, to take on more debt, which would encourage schools to raise their tuitions even higher. (The debt / tuition spiral.)
So, it looks like we’re stuck here in the elevator as it plunges down the shaft, with the external walls whooshing by faster and faster. The Emergency Stop button would save us, but there are too many people in front of it, and they all say the Emergency Stop button will make the situation worse.
LikeLike
“Congress claims the need to ‘pay for it’ by adding another more sinister law: FATCA.”
Yes I saw that too when I first read about FATCA.
Whenever the US government passes a new law (or levies a new tax) in order to “pay for” something, it is a scam to further widen the gap between the rich and the rest.
FATCA appears to have been written by US banks who seek to force Americans to put their investments in US banks, rather than foreign banks. The HIRE Act (which FATCA was part of) was sugar coating, and expired at the end of 2010. However FATCA goes on. The German Der Spiegel magazine says that because of FATCA, European banks are dumping clients with US citizenship. Deutsche Bank, Commerzbank, HSBC and Credit Suisse have said they won’t take Americans’ investment business anymore. Americans can have nothing that involves security holdings.
Incidentally, FATCA is a Democrat project. It was introduced by Rep. Alan Mollohan [D-WV], and passed six days later in the then-Democrat-controlled House. Five months later it passed the Democrat-controlled Senate, and was signed by Democrat Obama. Even Bernie Sanders of Vermont voted for this thing.
As usual, Republicans impose more austerity by cutting social programs. Democrats impose more austerity by increasing taxes.
LikeLike
Elizabeth Warren is the closest thing to an effective liberal America, though she seems clueless about Monetary Sovereignty.
Can’t tell whether that cluelessnes is an act by a bribed politician or whether it’s real, and she simply hasn’t take the time to learn.
Either way, she seems (so far) to be a better Presidential choice than Hillary or any Republican.
But, she has more than two years to prove me wrong.
LikeLike
The US Government can print as much money as it needs to pay for its debts RIGHT NOW, but contrary to the above statement, “forever” It is just not so. As more and more countries move away from the dollar until the dollar is replaced by something else, printing US dollars won’t be an option any longer. China won’t need to buy US dollars first then buy Middle East oil. The US dollar will become useless and printing more to pay off debts will not be an option. China and Russia already exchange goods and services without asking the US for “permission”
LikeLike
There may be more than 200 viable currencies in the world, and none of them are “useless.”
I seriously doubt the “usefulness of U.S. dollar will fall below all of them — the Canadian dollar, the Japanese yen, the Indian Rupee, the Mexican peso, the Russian ruble, the Australian dollar, the Chinese yuan, the Israeli shekel, the Swiss franc, the South African rand and at least 200 others.
This whole notion of the U.S. dollar becoming “useless,” and other nations abandoning us is far less likely than America being destroyed by a giant meteor.
My prayer is that you, your children, your grandchildren and your great, great, great grandchildren live long enough to see the dollar become useless (In short, I’m wishing you all very, very long lives.) 🙂
LikeLike
[1] “As more and more countries move away from the dollar until the dollar is replaced by something else, printing US dollars won’t be an option any longer.”
Because much of the world’s oil is priced in dollars (i.e. “petrodollars”) the USA has the advantage of being able to create as many dollars as it needs to buy oil. If much of the world stopped accepting dollars, then it could be a problem for the USA.
However, no country has actually stopped accepting US dollars. In all 196 countries plus their territories, you can always find a bank or an exchange house that will exchange your dollars for the local currency.
In border cities like Tijuana Mexico, 40% of the local stores accept only US dollars, and no Mexican pesos.
Dollars remain extremely valuable. Everybody wants more of them. Imagine parachuting into some random country and passing out hundred-dollar bills to everyone you see. You would brighten a lot of people’s day.
The only time that nations consider refusing to accept the dollar is when the USA uses the dollar as a weapon (e.g. against Zimbabwe) or uses it to exploit the locals (e.g. when the Argentine peso was pegged to the dollar). Even in Zimbabwe you can still get dollars. It’s just that dollars are no longer Zimbabwe’s official currency.
For more information, please see the following blog post…
https://mythfighter.com/2012/10/25/much-ado-about-nothing-the-end-of-the-dollar-as-reserve-currency/
[2] “China won’t need to buy US dollars first then buy Middle East oil.”
China gets its dollars by selling goods to the USA.
As for oil, China was a net exporter until 1993, but now imports about 58% of its oil, although this figure is rising. (China is now the world’s largest importer of oil.) The oil comes from the Middle East, but also Russia, Africa (Angola) and Venezuela. Some of it is priced in dollars. Some of it isn’t.
LikeLike
Agreed. Useless is the wrong word.
In the past few years China has sign currency agreements with Germany, Australia, Brazil, UAE, South Africa, Japan, India and Russia. The Gulf Arabs are planning, along with China, Russia, Japan and France to end dollar dealings for oil.they plan to use a bunch of different currencies, the yen, yuan, Euro, gold and new unified currencies.
No nation in history ever became wealthier by going deeper and deeper in debt, then printing the money needed to repay those loans. Germany for example.
I agree with all of the above article except the notion the US can continue to print unlimited dollars forever. I believe the US dollar and its position as the reserve currency days are numbered as more and more countries begin to question it as well
I too wish you and yours long, happy, healthy and prosperous lives.
LikeLike
For many years, “Germany, Australia, Brazil, UAE, South Africa, Japan, India and Russia, Gulf Arabs . . . , along with China, Russia, Japan and France” used the dollar to buy oil, and those folks got along just fine.
Perhaps, one day, a “basket” of currencies will be used. So what? The U.S. will get along just fine.
I can’t imagine why anyone thinks that no longer being the world’s reserve currency will be some sort of disaster. If it were, all of the above-mentioned countries would be in a disaster.
“Reserve currency” merely is the currency that world banks keep on reserve to facilitate foreign exchange. It’s just a convenience for banks, and is no big deal for the U.S.
There is one, and only one, limit to federal money creation, and that is an inflation that cannot be controlled by raising interest rates. We are nowhere close to that.
As for “deeper in debt,” U.S. “debt” is not like your debt or my debt. U.S. debt is nothing more or less than deposits in T-security accounts at the Federal Reserve Bank. U.S. “debt” is functionally identical with a bank savings account.
It shouldn’t even be called “debt.” It should be called “deposits.”
How does any bank “pay off” its savings account debt? It simply transfers money from the savings account to the depositors checking account.
The U.S. could “pay off” 100% of its “debt” tomorrow, without creating even one more dollar. The Federal Reserve Bank would transfer all the dollars in T-security accounts to checking accounts. Done.
This is all fundamental to Monetary Sovereignty
LikeLike
Sorry. I still disagree. I read the monetary sovereignty article. Well written. I still wholeheartedly believe the US dollar can and will be replaced. You’re very intelligent. You’re very articulate. But I still think my thoughts on this hold merit. Middle class. Save every dime. Why Not a bank bailout?
LikeLike
You’re missing the point. Or maybe I am. I have no idea what you mean by “replaced.”
If you’re saying that in the future, some other currency will be the “reserve” currency, you may be right. To that I shrug and say, “Who cares?” It’s meaningless.
If you’re saying that in the future, America will have an inflation that can’t be controlled by raising interest rates, you may be right. To that I shrug and say, “Big deal. At that time, we’ll slow down on the money creation, as we already, and prematurely, have — many times.”
There is zero possibility the U.S. will have a hyperinflation like Germany, Zimbabwe and Argentina have had. The situations that cause hyperinflations are too remote (which is why in 238 years, despite wars, recessions, depressions, stagflations, incompetent Congresses, Presidents and Supreme Courts, we never have had one).
And by the way, no hyperinflation ever has been caused by money “printing.” (Hyperinflations cause money “printing,” and not the other way around.)
If you’re saying that some time in the future, the world will refuse to accept U.S. dollars in payment for our purchases of goods and services, I say, “I pray you and your descendants live so long.”
So as I said, I have no idea what you mean by “replaced” nor with what it is you disagree.
And I also have no idea what your last line means.
LikeLike
Last line. For me… as I wrote before. Replaced what was the reserve currency before the US dollar?
LikeLike
British pound.
LikeLike
Rodger ,
Just a senior high school student hoping to make a buck or 2. And needing to know how and why the US is quoted to be in peril.by the Financial Times, Wall St Journal etc.. Not just in trouble. In serious trouble.
LikeLike
Not sure what “peril” they may be talking about. We are in many perils, mostly due to extreme right wing governing.
If they are talking about financial peril, it may be because they really don’t, or pretend not to, understand Monetary Sovereignty
LikeLike
QUESTION: I need to know how and why the US is quoted to be in peril by the Financial Times, the Wall St Journal, and so on. Not just in trouble, but in serious trouble.
ANSWER: It’s all lies. The mainstream blogs and publications are owned by the rich. They spew nothing but false propaganda designed to justify inequality. For example, the “peril” you are referring to is likely the so-called “national debt,” which is not a peril at all. As Rodger notes, this “debt” should be called the “national deposits,” since it merely consists of T-securities that people have bought. These deposits have no effect on the US government’s ability to create money. The mainstream blogs and publications falsely claim that this is a “peril” in order to justify more austerity, which causes more inequality. Less for you. More for them.
When the government wants to create money, it does not borrow one penny from anyone at any time. The government creates the money by simply crediting bank accounts. Likewise, the US government destroys money (i.e. taxes it) by debiting bank accounts. Money is not physical.
Another group that falsely claims the US government is “in peril” are gold traders, who are all hucksters. They claim that the dollar is about to “collapse” in order to sucker you into buying “gold.” In reality, they have no gold to sell. What they sell are shares in a “gold exchange” that has no gold. It’s worse than trading in cabbage patch dolls, since dolls are solid items, at least. The hucksters want you to think that gold is what gives value to fiat money systems. The truth is just the reverse.
It is the middle class that is in peril. The middle class is on the verge of extinction throughout the world. Stores, restaurants, and other businesses that used to cater to the middle class have almost all closed as customers disappeared. In the past, shopping malls catered to the middle class. Now another shopping mall closes each day. The only businesses that are still going are those that cater to the poor (e.g. fast food joints and dollar stores) or to the very rich (e.g. boutiques in Beverly Hills CA).
During the 1960s when the USA still had a strong middle class, people worked from 9 to 5. They took an hour for lunch, and they were paid for that lunch hour. Today you are lucky to have any job at all, and if you do, it is probably part time, at minimum wage, with no benefits.
Essentially the entire USA is becoming Detroit.
LikeLike
Agree there too. Mainstream media or what the left and sometimes the right love to call it, both agree the dollar is in serious trouble. Do you at least agree that if the dollar is devaluated to the point where other, large countries decide to utilize another currency to keep this world humming, the US citizens arse in deep an&&! ? Specifically the middle and poor?
LikeLike
I don’t know what you mean by “. . .utilize another currency to keep this world humming.” Are you talking about another currency being used as the reserve currency?
1. This has nothing to do with dollar devaluation, which by the way, is “inflation,” currently quite low.
2. Every OTHER nation on the earth issues a currency that is NOT the reserve currency. According to your theory, all these OTHER nations should be “arse in deep an&&!”
You write in such generalized, non-economics terms, it’s hard to know what you mean. “arse in deep an&&!” is not a term that is common in economics.
LikeLike
Bob,
You fell into the trap that all the gold bugs and hyperinflationists fall into. The dollar will collapse, nations around the world will stop using the dollar.
There is only one issue with your line of thinking – and stop falling into the trap – you are right but at the same time you are wrong.
You are right in that creating money is inherently inflationary. So says the most basic theory in economics, a theory a dunce could understand – supply and demand. You are right to say that creating money instead of helping – will hurt the poor.
You are wrong in thinking that it is countries that will stop using the dollar. What you are not realizing is that it is not countries that use the dollar – it’s business around the world. Businesses use the dollar because it has been and continues to be more stable than other currencies. What good is it that other countries create alliances if businesses are not willing to use those currencies? Additionally, the alliances are only attractive in theory – in practice, every country wants to devalue their currencies to “become more competitive” – which by the way is completely an inaccurate and dumb idea.
Secondly, those other currencies are in the same type of regime as the US dollar (fractional reserve), and are creating more of their own currencies than the US. In fact, most have complained that they would counter any US dollar devaluation, i.e. Brazil and India. In essence, it’s a race to the bottom – it’s not only the US doing the devaluation and it will never be.
The money supply in the US and all other nations has been growing year after year, and year after year we see the situation getting worst. That is the simplest explanation as to why creating money is plain stupid. Further, it is not money that makes anyone richer perse, what makes us wealthier is what the money can buy. In fact, people in the 60s, for example, were making a lower salary than today – yet they were wealthier relatively speaking.
The comment about the US being able to pay all it’s debt tomorrow is sad – seriously Rodger. You seriously think that money that is owed (debt) is the same as having cash in the bank? Hint: you could spend one immediately – the other you will have to wait 30 years for the US to pay you. And you think they are the same? If they are the same, than you should have no issues explaining why banks couldn’t pay up in 2008.
LikeLike
You said, ” creating money is inherently inflationary. So says the most basic theory in economics, a theory a dunce could understand – supply and demand.
But creating money affects only supply. You forgot all about demand.
If money is created and demand goes up, there is no inflationary implication. And in fact, if demand goes up enough, there could be deflation.
By the way, all six depressions in U.S. history, have been associated with reduced money creation. See: https://mythfighter.com/2009/09/07/introduction/ — #3.
LikeLike
ERROR 1: “It is not countries that use the dollar – it is business around the world.”
Both governments and businesses around the world use the dollar. When the IMF lends to the government of an African country, for example, the government uses the loan money to fund social programs, to pay companies to build roads, and so on.
ERROR 2: “In practice, every country wants to devalue their currencies to ‘become more competitive’.”
No. When you devalue your currency, you make imports more expensive. If you have a large trade deficit, this is disastrous.
ERROR 3: “Secondly, those other currencies are in the same type of regime as the US dollar (fractional reserve)…”
Fractional reserve banking is a myth. In order to create a loan, a bank simply credits the loan recipient’s bank account. The recipient must then pay back the loan (i.e. have his account debited) plus interest.
ERROR 4: “The money supply in the US and all other nations has been growing year after year, and year after year we see the situation getting worst. That is the simplest explanation as to why creating money is plain stupid.”
You imply that we should stop creating any more money. We must have much more fiscal austerity (which is already plunging millions into poverty). Whose being stupid here?
ERROR 5: “The comment about the US being able to pay all its debt tomorrow is sad – seriously Rodger.”
The so-called “national debt” is simply the amount of T-securities that people have purchased. When people buy those securities, their purchase money is deposited in a Federal Reserve account. Those deposits are a Fed asset, not a debt. The “debt” part is the interest that the Fed must give back, along with the money deposited, when a T-security matures. The Fed creates this interest money by crediting the recipient’s regular bank account. If the Fed wanted to, it could — with the touch of a computer button — give back all the money on deposit, thereby retiring the so-called “national debt.” This would have no inflationary effect, since the money already exists, and was deposited at the Fed.
Meanwhile the federal government (apart from the Fed) would continue to create money as always. The “national debt” poses no restraint whatsoever on the regular US government’s ability to create money by crediting accounts.
ERROR 6: “If they are the same, than you should have no issues explaining why banks couldn’t pay up in 2008.”
Big banks indulged in complex derivative scams like credit default swaps, using structured asset-backed securities such as collateralized debt obligations. These securities were in fact worthless, since they were based on non-functioning loans. However, bank fraud has nothing to do with the US government’s ability to create money.
LikeLike
CORRECTION:
I said, “When you devalue your currency, you make imports more expensive. If you have a large trade deficit, this is disastrous.”
There might be an exception if your country has true Monetary Sovereignty, with a currency that is widely accepted around the world. The USA, for example, has the world’s largest trade deficit.
Still, a devalued dollar would cause imports to become more expensive. The US government could compensate by creating more money, but no one in the USA or abroad would be happy to learn that his dollar holdings have been devalued.
Anyway the US government is creating LESS money each year. It’s called austerity. The current money supply is very high, but only if we count all the “paper assets” in the financial economy. Meanwhile for regular people (i.e. in the real economy) the current money supply is far too low. Everyone is hurting for money.
LikeLike
” . . . a devalued dollar would cause imports to become more expensive. The US government could compensate by creating more money. . . “
Actually, the U.S. government would compensate by raising interest rates (i,e. “strengthening” the dollar).
LikeLike
You should be clearer – the US government is NOT creating less money every year – that’s a blatant lie.
The correct thing to say is that the rate of money creation is slowing. The 2 have different meanings.
Everyone is hurting for money? What a dumb thing to say. An average Joe today makes many times what high income people were making 20 – 30 – 40 years ago. Tell me – why aren’t they satisfied with the “more money”? What are they poorer?
Think for once..
LikeLike
Quat,
Quat error “Both governments and businesses around the world use the dollar. When the IMF lends to the government of an African country, for example, the government uses the loan money to fund social programs, to pay companies to build roads, and so on.”
That does not do much in terms of demand for dollars. Import export transactions, what Rodger outlined, is what matters. A loan from the IMF is a single transaction – banks perform millions of transactions daily – in the trillions. DAILY.
Quat error “No. When you devalue your currency, you make imports more expensive. If you have a large trade deficit, this is disastrous.”
Doesn’t the US, the UK, India, France, Japan run a large trade deficit? I agree that it is disastrous – but politicians don’t care about disasters – they care about votes – votes today at that. Devaluation of the currency is a temporary measure to boost employment – at the expense of major issues down the line – as you outlined.
Quat “Fractional reserve banking is a myth. In order to create a loan, a bank simply credits the loan recipient’s bank account. The recipient must then pay back the loan (i.e. have his account debited) plus interest.”
If that is the case – I invite you to try answering the question I asked Rodger. Why were banks not able to “credit accounts” in 2008 during the crisis and why did so many banks ever go bankrupt or insolvent? Crediting an account without funds is an accounting break and fraud – but the system is designed to “create money”, just not the way you think.Let me also remind you that another function of the Federal Reserve is to proof all banks within the US dollar system.
Fractional reserve allows bank to lend up to 90% of all deposits. What ends up happening though – is that the same money will be lent over and over – while technically only 1 person should have rights to the money. It’s why the national debt is 17 trillion and growing. This is the reason why banks can never pay all the outstanding deposits – EVER.
Quat “You imply that we should stop creating any more money. We must have much more fiscal austerity (which is already plunging millions into poverty). Whose being stupid here?”
What is the definition of insanity again? The money supply and the national debt have been growing for many many years – are you better off? And you think creating more debt will help us? Hahahahahaha
Hint: Since the economy is driven by debt – those with first access to credit benefit from the growth in debt. And who are those Quat? Guess….
Quat “The so-called “national debt” is simply the amount of T-securities that people have purchased. When people buy those securities, their purchase money is deposited in a Federal Reserve account. Those deposits are a Fed asset, not a debt. The “debt” part is the interest that the Fed must give back, along with the money deposited, when a T-security matures. The Fed creates this interest money by crediting the recipient’s regular bank account. If the Fed wanted to, it could — with the touch of a computer button — give back all the money on deposit, thereby retiring the so-called “national debt.” This would have no inflationary effect, since the money already exists, and was deposited at the Fed. Meanwhile the federal government (apart from the Fed) would continue to create money as always. The “national debt” poses no restraint whatsoever on the regular US government’s ability to create money by crediting accounts.”
Than why are they called “T” securities. Doesn’t the T stand for Treasury? And doesn’t the Treasury fund government operations? I will tell you what a computer button will do – destroyed the economy – that’s what. Paying off those T-securities will credit those accounts and make those funds immediately accessible.Aside from the fact that people can spend it – guess what the banks will do with all these newly created deposits? I will look forward to your response on this one – but no name calling please.
Quat “Big banks indulged in complex derivative scams like credit default swaps, using structured asset-backed securities such as collateralized debt obligations. These securities were in fact worthless, since they were based on non-functioning loans. However, bank fraud has nothing to do with the US government’s ability to create money.”
You missed the point of my question to Rodger. The reason I brought that point up is because banks were loan rich – they had tons of assets. Wachovia had billions worth of loans – but they lacked the liquidity to fund operations. If I owe you 100 million – you are wealthy on paper and so long as I pay you. If you end up needing cash quickly to stay in business and I cannot repay the 100 million – you are gone. Much different if you had the 100 million – ain’t it?
Bank fraud is alive and well – and it’s not about derivatives. Derivatives are an asset – it’s like buying rice in hopes that it will gain value. They lost value just like everything else lost value in 2008 – it’s called debt deflation. The fraud happens by design – fractional reserve allows for the re-lending of the same money over and over.
Rodger,
You forgot to state the fact that all those depressions were preceded by a huge increase in debt/credit. And Rodger – what goes up must….?
LikeLike
“You forgot to state the fact that all those depressions were preceded by a huge increase in debt/credit.”
You just made my point. Apparently you don’t want to understand that the word “debt” has two, completely different meanings when applied to private finances vs. federal finances. Federal “debt” went down, in advance of every depression.
” I will tell you what a computer button will do – destroyed the economy – that’s what.”
“Destroyed” the economy, how? Would zero money creation have grown our economy?
“ Wachovia had billions worth of loans – but they lacked the liquidity to fund operations.”
Again you refuse to understand the difference between private finances and federal finances. Unlike Wachovia, the federal government never can run short of its sovereign currency.
“Fractional reserve allows bank to lend up to 90% of all deposits.”
Wrong, yet again. In theory, fractional RESERVE banking would allow banks to lend a fraction of RESERVES. However, banks get all the reserves they need from the FRB or from overnight borrowing. The only real limit to bank lending is capital. It really should be called “fractional capital lending.”
Just a suggestion: Before you make everyone on this blog laugh at you further, please read the facts. They are contained in the 1200 information posts provided at the left to those who actually wish to learn something, rather than just mouthing off nonsense. Start with the first one at the bottom of the list.
LikeLike
Happy independence day!!
No – Federal debt went down as a consequence of the depression.
You can manipulate the money supply via fractional reserve. A bank lends another bank 100 million – the other bank will lend out 90 million and keep 10. The other bank receiving the 90 million will lend out 80 million and keep 10 – and it keeps going and going. Up to this point there has been 270 million created in debt – out of 100 million.
Since this process will happen on top of the debt – what reserves are you referring to? There are no “reserves”. You know full well the system is 95% debt and 5% actual cash. If you are remotely familiar with banking – which I think you are – you would know that the last place banks borrow from is the FRB. Do you know why? Because when a banks has to go borrow at the FRB – they probably cannot borrow from anyone else and are in trouble. Also, the Fed will also put the bank under their microscope should they go to the Fed window. No liquid bank EVER goes to the FRB, EVER.
But thanks for bringing up the point about capital – capital is liquid – and includes cash. Banks use capital as a base to expand their lending. If you pay off treasuries – the capital on the hands of the banks will sky rocket. If people decide to borrow – there will be massive amounts of inflation caused by the newly created debt. Of course – there is a chance this doesn’t happen if people decide they won’t borrow. But if they do – it will cause a lot of issues.
There is one component that neither you, nor the Fed, nor the government can manipulate – and it’s exactly what caused the problems in 2008. “Economists” like Krugman haven’t figured this out – not that you can expect more than that from Keynesians. It’s called social mood. If people decide they will cut back on debt – there is nothing you, or Krugman, or Yellen, or Obama can do to stop the collapse. The collapse stops when people decide to borrow again. It is a design flaw with fractional reserve and one you will see soon enough. When it comes – hypocrites like Krugman, Yellen, and all the other Keynesians, Liberals, communists, socialists etc will look the other way and repeat the same garbage we heard in 2008 – nobody could have seen it coming. And yest, all liberals, communists, socialists, leftists are one and the same.
For every action, there is an equal and opposite reaction – they all know this – yet they all ignore it because they have bowed to defend their evil agenda. The sad thing is that they all preach the same garbage – we are here to defend the poor. No you are not – you are here to defend your communism, your liberalism, your left, your socialism. Like someone I know used to say – we all pay our deeds here on earth. All the manipulation being done by the Fed (which is a product of you socialists/communists/liberals), by the government – will all be paid for – and we all will be here to see it. I’d like to see how you will feel about the poor when the time comes – because you liberals are the cause of all these problems.
LikeLike
Sadly, Georgia man exhibits zero knowledge of economics, which may be the reason he writes such long comments.
His latest diatribe contains so many errors, I can’t spend time correcting them all. I’ll just address the first one:
I had said all depressions followed reduced federal debt. His response was”
” No – Federal debt went down as a consequence of the depression.”
Fact: U.S. depressions tend to come on the heels of federal surpluses.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
These facts probably will not impress Georgiaman
LikeLike
“The goal should be for more of us to work less, but receive more.”
The previous quote is my favorite in this well thought out post. Should we be celebrating yesterday’s jobs report that said 288,000 jobs were created? The answer is that it depends if we are receiving more, and that can’t be easily quantified.
The benchmark work week has been 40 hours in the US since 1946, though it was clearly higher in the 19th century when most people were farmers. Technology has reduced much of the heavy lifting, but the blueprint towards working less and receiving more lies in the “Ten Steps to Prosperity”.
I also want to comment on the 75th anniversary of Lou Gehrig’s speech. ALS sufferer Steve Gleason says in the link below that “ALS is not incurable, its underfunded”. The article talks about private fundraising. Why can’t the Monetary Sovereign Federal Government fully fund research for chronic diseases? Wealthy people set on widening the wealth gap contract these diseases along with the rest of us. Or do the wealthy think that publically funded disease research will turn the US into Zimbabwe?
http://espn.go.com/blog/new-orleans-saints/post/_/id/7688/gleason-announces-bold-plan-to-end-als
Happy Independence Day Rodger and his readers.
LikeLike